BHP Billiton Annual Report and Accounts †MyAssignmenthelp.com

Question: Discuss about the BHP Billiton Annual Report and Accounts. Answer: Introduction In the modern corporate environment, there are several complexities in the financial transactions that occur on daily basis, and that necessitates fulfillment of conceptual framework obligations of accounting. The reason behind this ideology can be attributed to the fact that conceptual framework obligations allow an organization enhance its fundamental and enhancing qualitative characteristics like materiality, relevance, reliability, faithful representation, etc of financial reporting, thereby assisting both users and preparers in making effective decisions for future developments (BHP Billiton, 2017). Furthermore, in the absence of a conceptual framework of accounting, interpretation of financial information will become difficult for the users and they may fail in making proper decisions based on such information, thereby creating a topsy-turvy scenario for the entire organization (Carmichael Graham, 2012). With the help of this report, the effectiveness of BHP Billiton in fulfil ling the obligations of the conceptual framework of accounting will be analyzed taking into consideration its recognition criteria, fundamental and enhancing guidelines, and consideration of objectives of conceptual framework. BHP Billiton has efficiently considered the objective of conceptual framework by disclosing relevant financial information to the stakeholders and other shareholders in order to assist them in understanding and interpreting such information prepared in accordance with the IFRS standards. Besides, the company has also explained its underlying performance through disclosure of alternate performance measures. Moreover, the company has also excluded certain details from its financial statements to the extent offered by Australian Law and the United Kingdom. The reason behind this can be attributed to the fact that any such matter that is associated with impending developments and matters in the negotiation course can cause serious harm to the prejudicial interests of the company (Peirson et. al, 2015). Nevertheless, this is because such disclosure can be misleading owing to the fact that it is preliminary or premature in nature, associated to commercially sensitive contracts, may undermi ne confidentiality between the clients or suppliers and the company, or may otherwise unreasonably spoil the entire business (Freeman Alexander, 2013). Overall, the information categories excluded from the annual report of BHP Billiton Group comprises of forward-looking projections and estimates prepared for the management of internal purposes, information associated with the projects and assets of the company that is susceptible and developing to change, and details related to pricing modules and commercial contracts (Caradonna, 2014). All these inclusions and exclusions in the financial statements of the Group clearly shed light on the fact that BHP has effectively considered the ideology of proper disclosure strategies that can, in turn, assist its stakeholders in their decision-making processes. With respect to the corporate governance affairs, BHP Billiton Group has been committed to highest standards of corporate governance by undertaking its business based on the ASX recommendations listed in the third edition of the ASX (Australian Stock Exchange) Corporate Governance Principles and Recommendations. In addition to this, BHP Billiton has also furnished their reports in accordance with the UK Corporate Governance Code that also comprises of the Turnbull Guidance. Furthermore, in order to consider the objectives of the conceptual framework of accounting, the Group has offered material information in relation to its investments in low-emission technologies for reducing fossil fuel emissions (Deegan, 2011). With the provision of such material information, the stakeholders can be easily guided on whether to invest their funds into the company or get associated with the company in any scenario. Overall, every type of information that is required by stakeholders for addressing t heir decision-making process is appropriately taken into account by BHP Billiton and the reason behind this fact can be attributed to the companys prior significance towards materiality segments (BHP Billiton, 2017). Hence, the business model of BHP Group has assisted it in disclosing every type of information that is required to the stakeholders and for such purpose, the company has not shown any negligence. Recognition criteria The accounting policies of the company have been prepared in accordance with the IASB, AASB, AAS, IFRS, and requirements of Corporations Act 2001 that has facilitated in enhancing the meaningfulness of its financial information. Furthermore, for the purpose of corporate governance, the company has adhered to the UK Corporate Governance Code for enhancing its recognition criteria as a whole (BHP Billiton, 2017). The companys revenue is measured at the fair value of the obtained consideration. In association with the sale of goods, revenue is recognized when the rewards and risks of goods ownership have been passed to the buyer in accordance with agreed delivery terms. Further, in relation to provisionally priced sales, revenue is recognized at the expected fair value of receivable consideration in relation to contractual or/and forward price and ascertained hydrocarbon or mineral specifications (BHP Billiton, 2017). Overall, the income of the Group is recognized when it becomes feasible that the financial benefits related to a transaction will flow to it and they can be measured effectively or reliably. Moreover, dividends are recognized upon their declaration (Parrino et. al, 2012). Taxation on the loss or profit for the year consists of deferred and current tax. Moreover, taxation of the company is recognized in the income statement except to the level that it is associated with the items recognized directly in equity wherein the tax effect is also identified in equity (BHP Billiton, 2017). Furthermore, recognition of deferred tax assets are done to level that it is feasible that future tax revenues will be prevalent in contrast to the utilization of temporary differences. The Groups trade receivables happens at the fair value (initially) and later on at an amortized cost with effective method of interest deducted from the allowance for an impairment (BHP Billiton, 2017). Plant, property, and equipment The Groups PPE is recorded at cost minus impairment charges and accumulated depreciation (BHP Billiton, 2017). Cost can be defined as the consideration fair value needed to procure the asset at the date of acquisition or the period of construction and contains direct expenses of bringing such asset to the desired position needed for operation and expected future expenses of rehabilitation and closure of the facility. Where the payment for the consideration of the fair value of an acquisition exceeds the fair value of recognizable assets, liabilities, and acquired contingent liabilities, the difference is regarded as goodwill. Further, where consideration is less than the fair value of procured total assets, the difference is identified immediately in the companys statement of income. Such goodwill is not amortized and is measured at cost minus impairment losses (Needles Powers, 2013). Moreover, in relation to other intangibles, the amounts of same are capitalized for the procurement of recognizable intangibles like licenses, software, and initial payments for procurement of mineral lease assets wherein it is regarded that the same will assist in contributing to future tenures through the generation of revenue or reduction in expenses as a whole (BHP Billiton, 2017). The Groups provisions for rehabilitation and closure are recognized when the amount can be estimated reliably, when it pursues a constructive or legal obligation as an outcome of the events that happened in the past and when it is more feasible the resources outflow is essential to cover the obligations (BHP Billiton, 2017). Fundamental and enhancing guidelines In relation to the effectiveness of BHPs obligations in fulfilling the requirements of conceptual framework, it can be seen that the company has various fundamental and enhancing guidelines contained within the operations enabling it to sustain a competitive advantage in the market and provide accurate and adequate information to the stakeholders for enhancements of their decision-making process. The companys guidelines for the independence rules and regulations of the directors allow it to comply with the faithful representation qualitative characteristic of the conceptual framework because the directors independence is guided by fulfillment of rules like UK rules, US rules, and Australia rules. Moreover, these directors are also bound to reflect an authentic view of the financial statements of the company by complying with the requirements of Corporations Act 2001 (Davies Crawford, 2012). In addition, the company also has a guideline that allows it set reporting processes and cont rols for the purpose of the release of significant information to the stakeholders. In relation to this, BHP is committed towards highest disclosure standards by signalling that all potential investors contains a link to relevant, proper information in a timely and accessible way for the purpose of making informed decisions (BHP Billiton, 2017). With the help or prevalence of such fundamental guideline within the Groups framework, qualitative characteristics of the conceptual framework like relevance, reliability, and timeliness are also easily taken into consideration, thereby facilitating in enhancing the meaningfulness of financial information present in the statements (Hemmer Labro, 2008). Another significant and enhancing guideline within the Group is the adherence to JORC Code (Joint Ore Reserves Committee). With the help of such guideline, the company ensures both external and internal users regarding its effectiveness of operations. This guideline is for public reporting in relation to mineral resources, reserves of ore, and exploration results in Australia that is accurately fulfilled by the Group and that can allow stakeholders rely upon the same for making effective decisions (BHP Billiton, 2017). In addition, the Group also has a risk management guideline within its affairs that allows it in managing and identifying opportunities and risks for creating long-term value for the shareholders. Moreover, the presence of internal control functions for mitigating the effects of risk allows BHP to comply with the legal requirements and internal guidelines (Levine Prietula, 2013). Such control function can provide an opportunity to the Group in reducing the possibiliti es of risks and further surveillance of overall processes (Brigham Daves, 2012). These guidelines have not only assisted the company in fulfilling its disclosure requirements but have also catered to the obligations of the conceptual framework of accounting (Siraj et. al, 2011). Recommendation After a critical assessment of the financial statement of BHP Billiton, it is observable that the companys disclosures are of relevant nature and this is the reason why stakeholders have been able to make proper decisions based on the same. However, it is recommended to the company that only key financial and non-financial performance methods be disclosed to the users (Douma Hein, 2013). This means that information that is not relevant in nature must be discarded. Further, the discussion be spread to the matter that the provision of non-significant information may only create troubles and complications for the users in making informed decisions, thereby spoiling the overall significance of conceptual framework of accounting. Conclusion Based on the previously mentioned report, it can be stated that consideration of objectives of the conceptual framework is highly needed in the modern scenario because it assists in enhancing the truthfulness and meaningfulness of financial information. Moreover, in relation to BHP Billiton, compliance with requirements of the conceptual framework have been accurately done through the disclosure strategies that must be very useful to the users in making proper decisions. Nevertheless, this also sheds light on the fact that fulfilling the obligations of the conceptual framework of accounting can assist an organization attains the fundamental and enhancing qualitative characteristics like materiality, faithful representation, relevance, reliability, comparability, understandability, timeliness, etc. Therefore, BHPs effectiveness of fulfilling the obligations of the conceptual framework can allow it to enjoy a good reputation in the market. References Brigham, E. and Daves, P. 2012. Intermediate Financial Management. USA: Cengage Learning. Caradonna, J. L., 2014. Sustainability: A History. Oxford University Press Carmichael, D.R. and Graham, L. 2012. Accountants Handbook. Financial Accounting and General Topics, John Wiley Sons. Davies, T. and Crawford, I. 2012. Financial accounting. Harlow, England: Pearson. Deegan, C. M. 2011. In Financial accounting theory. North Ryde, N.S.W: McGraw-Hill Douma, S. and Hein, S. 2013. Economic Approaches to Organizations. London Freeman, E. and Alexander, M. 2013. Stakeholder management and CSR: questions and answers. Oxford Press Hemmer, T. and Labro, E 2008. On the optimal relation between the properties of managerial and financial reporting systems. Journal of Accounting Research, 46, pp. 12091240. Available through: https://www.scopus.com/record/display.uri?eid=2-s2.0-54249141091origin=inwardtxGid=85d117d174c0e27c36a27eeee1be7d6b [Accessed 18 April 2018] BHP Billiton 2017. BHP Billiton annual report and accounts. [online]. Available at https://www.bhp.com/investor-centre/annual-reporting-2017 [Accessed 17 April 2018] Levine, S. S., and Prietula, M. J 2013. Open Collaboration for Innovation: Principles and Performance. Organization Science, Harvard Press Needles, B.E., and Powers, M. 2013. Principles of Financial Accounting. Financial Accounting Series: Cengage Learning. Parrino, R., Kidwell, D. and Bates, T. 2012. Fundamentals of corporate finance. Hoboken, NJ: Wiley Peirson, G, Brown, R., Easton, S, Howard, P. and Pinder, S. 2015. Business Finance. 12th ed. North Ryde: McGraw-Hill Australia. Siraj, S., Mikhailov, L., and Keane, J. A 2011. Priests: an interactive decision support tool to estimate priorities from pairwise comparison judgments. International Transactions in Operational Research, 12(4), pp. 45-61